The University of California's Board of Regents, overseer of the nation's most prestigious public system of higher education, has been badly bruised in the past three months by the difficult selection of a new UC president, furors over executive compensation and the looming specter of state budget deficits.

Now, fueled by their controversial handling of those issues, the UC regents face proposals to reform the board, to democratize what critics complain is a governing panel dominated by affluent political donors to the governors who appointed them.

Some observers say that a more diverse board might not have taken actions in closed session that resulted in outgoing UC President David P. Gardner receiving $858,000 in deferred pay and retirement benefits he otherwise would have forfeited.

"I think there is a general public mood, especially at a time when we are having a real budget crisis, that the regents are completely out of touch with the people of California," said Andy Shaw, legislative advocate for the systemwide UC Students Assn. That group and others advocate a state constitutional amendment that would sharply limit the number of gubernatorial appointments to the regents board and give legislators, faculty, students and alumni more influence in making crucial decisions for the nine-campus system.

Consumer advocate Ralph Nader recently spoke in favor of a popularly elected Board of Regents, similar to other state university systems, including the well-respected University of Michigan and University of Illinois.

"You cannot run an institution that large, that's funded by taxpayers, that's supposed to be operating in a democratic society, in an autocratic and top-down manner," said Nader. He sharply criticized the regents' action last year that ended UC students' contributions to a Nader-allied organization through campus registration fees.

Conceding that their image has been tarnished, regent leaders stress that they have moved to allow more public scrutiny of decisions and to review the salary and benefits given top administrators. Some even agree with critics that the board's composition does not meet the state Constitution's mandate that regents be "broadly reflective of the economic, cultural and social diversity of the state, including ethnic minorities and women."

However, regents also argue that the governance structure has nurtured an amazingly complex and productive university, as measured by Nobel Prizes, research grants and demand for admissions. Alternatives may only politicize UC further, not improve it, they say.

"We've been through a pretty traumatic time, and it's made us re-examine things that aren't (examined) when things are going well, when there is a lot of money around in the budget," said Meredith Khachigian, who is chairing the regents board for her second year.

Still, the overall structure "has worked well and you don't change a system that is working well," said Khachigian, who was appointed by Gov. George Deukmejian to the board in 1987. A UC Santa Barbara alumna and education activist, she is married to Republican attorney Kenneth Khachigian, a former Deukmejian adviser and aide to Presidents Richard M. Nixon and Ronald Reagan.

The debate is taking place as Gardner prepares to retire as president Oct. 1, to be replaced by Jack W. Peltason. Peltason, 68, a political scientist, has been UC Irvine chancellor since 1984, overseeing the greatest period of sustained growth in building, fund raising, big-name hires and research grants in the university's 27-year history. He is also credited with repairing strained relations with the city of Irvine and reaching out to the greater Orange County business and social communities, which have responded with major endowments, as well as partnerships in a community theater and research facilities.

As Peltason prepares to assume leadership, the UC system faces difficult questions about its future: Will Peltason be a temporary caretaker? Should fees paid by the 166,000 students be raised once again as state budget support dwindles? Should UC give up its hopes to build a 10th campus? How can the university provide access to the growing ranks of minority students? Can UC continue world-renowned research while providing quality education to undergraduates? Have UC administrators become too imperial in ambitions and perks and is it time to dramatically pull in their reins?

Unlike the Cal State system, UC has constitutional independence to make most decisions.

"Constitutional independence sounds great, but if you lose the confidence of the people, what's the point?" asked Regent Roy T. Brophy, who says the board will regain public support.